Lecture on Pakistan's Financial Mismanagement: Recent Borrowing and Economic Consequences

Overview

• Pakistan's recent financial activities highlighted by a new report.
• The country borrowed 3.2 trillion rupees (~$11.5 billion) in 45 days.
• Borrowing was done domestically at high interest rates.

Breakdown of Borrowing

• Period: Between May 15th and June 28th
• Amount: $11.5 billion (~quarter of a billion per day on average).
• Comparable to the entire amount borrowed in the previous financial year (ending 2023) but done in just 45 days.

Implications and Accounting Tricks

• Fresh loans taken after mid-May, post declaration of last financial year's expenses.
• Loans will not be registered until mid-2025, misleading public and creditors.
• Aim: Conceal the true level of indebtedness.

Use of Bond Market

• Pakistan also taps into the bond market, specifically Treasury bills.
• Treasury bills (Government Bonds): Short-term lending (3, 6, or 12 months) with interest.
• Comparison: Pakistani Treasury bill return ~20% vs. India's ~5%.

Reasons for High Yield

• Government's desperation for money.
• Currency volatility (Pakistani rupee almost half its value 3 years ago).

Economic Impact

• Recent budget aims to increase tax revenue by over 40%, impacting ordinary citizens.
• New IMF loan negotiations.
• IMF Conditions: Further tax hikes, potential 45% tax rate on agricultural income.

Conclusion

• Example of severe economic mismanagement.
• Citizens will bear the long-term consequences.

Additional Remarks

• The lecture forms part of a broader news coverage, emphasizing unfiltered reporting from diverse perspectives.